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Welfare Reform At 15

Monday marked the fifteenth anniversary of the landmark 1996 welfare reform, passed with support from both the Republican “Contract with America” Congress and President Bill Clinton. Experts and journalists have been weighing in this week on the reform’s successes and failures, particularly during the current recession.

The basic political belief driving the ’96 reform was that giving low-income people money is counterproductive because it encourages dependence on the government and reduces recipients’ incentives to work. The solution? Require welfare recipients to work (or participate in job training/job development) and place limits on how long they can collect benefits. Just as important as the reform’s stricter requirements for welfare receipt were its changes to the structure of the program. While the previous program, AFDC, was an open-ended entitlement with no funding cap, its replacement, TANF, receives an annual block grant of $16.6 billion in federal funding, an amount that hasn’t changed in 15 years. The ’96 reform also gave states more flexibility in how they administer the program.

Impact of the Reform

TANF has indisputably succeeded at one of its goals: cutting the welfare rolls.Welfare caseloads have declined 60% since 1996, even though the number of families in poverty has been increasing since 2000. While conservatives may laud the reduction in welfare cases, it doesn’t mean that fewer people are poor, just that fewer of them are accessing benefits. In 1996, 68% of families living in poverty were receiving welfare, while in 2009, the figure was just 27%.

Expert opinion on the success of welfare reform in actually reducing poverty is mixed: most agree there was a significant impact in the first few years but many argue that these early gains were almost entirely undone in the past decade.

Ron Haskins, an architect of the legislation now at the Brookings Institution claims it has “been quite successful.” He points to increased employment among women with low-education levels and reductions in child poverty in the first five years after the reform. But many claim these early gains were a product of the booming economy of the late ‘90s more than welfare reform. As LaDonna Pavetti at the Center for Budget and Policy Priorities shows in the graph below, the employment gains among women have steadily disappeared since 2000.

The Heritage Foundation, who played a significant ideological role in shaping the ’96 legislation, offers an interesting take on the reform’s success. They claim the spirit of the reform – discouraging dependency and encouraging work – is no longer being implemented and that’s why it hasn’t worked, though they don’t offer much concrete proof of this perspective.

To me, the evidence suggests that during the strong economy of the late 1990s, stricter eligibility requirements and more flexibility in program administration helped encourage some poor people to work and lifted some families out of poverty. But a good part of these gains were undone when the economy slowed and jobs became scarcer in the 2000s. And when the economy collapsed in late 2007, not only were previous gains lost, but the new welfare model was ill-equipped to help families who were struggling in the recession.

I’ll have a post tomorrow on this last point, exploring how welfare has (or hasn’t) worked during the current recession.